How much are you willing to pay per lead?

Question

"Be the general" is good advice, but the general has to pay (or get someone else to pay) his foot soldiers. How much are you willing to pay per lead for potential house flips? This is just to *get* the lead--basically an address. Not including analysis and pursuit of that lead.

Thanks all!

David Lee Hall, III · Answer

@Paul Witte

So I can say looking at cost per lead, while interesting and a good discussion point is kind of useless. It is about cost per closing. This tells you how good your leads are.

Really rough example:

You pay $1 per lead for 10,000 addresses of some criteria and you mail them all and buy 2 houses. That is $1 per lead but $5000 per closing.

Next you pay $100 per lead to the secretary at the local estate attorney office. You get 10 leads. You buy 2 houses. You paid $500 per closing.

In the first scenario your $1 leads made you $35,000. ($20k per flip profit)

In the second scenario your $100 leads made you $39,000.

Was it better to pay $1 or $100 for a lead?

Overall this is good to track because you may want to buy some cheap leads somewhere to say get into Section 8 housing areas cheap for rentals; but if you aren’t tracking cost per close, you have no idea how good your leads are. If all leads were created equal, then yes this would be a great metric. Unfortunately they are not, so it is more about cost per close. The closer you can get those two numbers, the higher quality your leads are. This goes down the rabbit hole of A-B testing and lead generation/marketing.

Joe S. · Answer

That statement or question is way too broad. That’s like asking how much would you pay for a car. Well there’s some cars next to nothing in the junkyard. Now how much would you pay for a lead depends on the quality of the lead. There’s a whole bunch of junk leads out there.

Ned Carey · Answer

@Paul Witte you are looking for an easy answer but it is harder to give than you wild think. I have been doing this for 15 years. I couldn't begin to tell you what my cost per lead is, in either time or money.  I say that because my pipeline has more to do with my time involved not the money I pay for leads.

My guess is most investors couldn't tell you that number. It is just not something they track. Most investors also get their deal in many different ways.

Now maybe someone who is a direct marketer will jump in with a number. We do have some marketing people who are regulars on the site.

If you just want to know how much for a list, contact some of the major mailing list houses. Melissa date comes to mind.

Ned Carey · Answer

@Joe S. has it right. How are you defining "Lead" and  what kind of leads are you talking about.    I have seen people offer $10,000 for a lead they close on. Others might pay as little as  $.25 for list from a mailing house.

May Emery · Answer

@Paul Witte I will PM you since we are unable to promote - especially ourselves on the forum.

Paul Witte · Answer

Thanks Mary.  That's really helpful info.  How do those brokers generate their lists?  Have you done any deals using those kinds of lists as leads?  Do you have recommendations for specific brokers?

May Emery · Answer

@Paul Witte Mailing list brokers can provide lists - generally between 7 and 10 cents per name. These are somewhat pre-qualified. You can customize the characteristics you want. For the property; home value, single/multi/condo, beds/baths. The same thing for the owner - how long they have owned, absentee or owner occupied, their age, do they have equity. You can even specify that they have Low Financial Stability Scores!

The same list broker should be able to then do bulk skip tracing to add in the phones and emails where available. That should be in the 7 cent range.

Expect to have a minimum order requirement. It will probably be between $95 and $200 per order.

David Lee Hall, III · Answer

Profit is fickle. I would agree that is best, but there are factors such as how good you estimate rehab and how good you are at getting cheap labor that impact this. So really there are other factors that I would consider profit as a different LAG metric.

oh my, man, strategy is so loaded, sorry I don’t think I could answer that in a concise manner. I think it would take about 5 beers and 4-8 hours at the bar. Sorry that isn’t helpful.

Paul Witte · Answer

I think that makes good sense.  But that only works retrospectively--running numbers on what was already done.  Also, by your very good line of reasoning, isn't cost per $ of profit after exit make even more sense?

My question really is more about, as a new investor still trying to figure out strategies, how to I evaluate different strategies?  Some cost time, some cost money, some require long waits, etc etc.  The specific scenario I'm considering is like this: I know the area I'm targeting, but it's fairly large, and I'm short on time.  But I am good at building relationships quickly, following up with people, and making it easy for a curious potential seller to move forward with a deal.  For those reasons, I'm considering something like a "driving for dollars" approach where I pay someone else to find potential properties and then I'll do the analysis and pursue the promising ones.  But that requires me to front some money for marketing, I guess you'd call it.

As I evaluate whether to try this, I am just trying to figure out if this is plausible.  I can't imagine I could convince someone to do this for less than $2-3 per address.

Anyways, that's laying it all out there.  I'm not trying to look for "an easy answer", just looking for help in thinking through potential strategies to generate leads with minimal time cost to me.  Any thoughts are appreciated.

Paul Witte · Answer

OK, point taken.  I was trying not to bog down the question with excessive detail and leave it open to broad responses...

Like I said, "an address" of an actually or apparently (based on a drive by) distressed property within an area you like to work where median home values are ~$300k.  I can see someone paying a wholesaler $10,000 for a contract, but that isn't what I mean by "lead".  I'm talking about a list of addresses where maybe only 1-2% would you end up actually offering on, expecting to earn maybe 20-30k in profit.

Even if that's not enough information based on this scenario, what about your own scenario and process?  What rules of thumb do you observe, or retrospectively what do you find your costs at this level to be?

How much are you willing to pay per lead?

Most Popular Reply